This study investigates whether government subsidies promote R&D cost stickiness in the new energy vehicle (NEV) industry in China—that is, whether public funding encourages firms to retain R&D resources even during periods of declining sales. While prior literature primarily explores the relationship between subsidies and R&D investment levels, it often overlooks firms’ financial position and dynamic cost behaviors. Given that R&D investment has high adjustment costs and is sensitive to cash flows, reductions in R&D spending during downturns may reflect managerial cost asymmetry rather than a crowding-out effect of subsidies. Moreover, government subsidies may serve as a signal of long-term market optimism, motivating managers to retain R&D resources during economic downturns. Using a panel dataset of 573 listed new energy vehicle (NEV) firms in China’s A-share market from 2007 to 2021, we construct a model based on the asymmetric cost behavior framework to empirically assess the impact of government subsidies on R&D cost stickiness. The results show that government subsidies significantly increase the degree of R&D cost stickiness. Serving as a signal of future market optimism, subsidies raise managerial expectations and incentivize decisions to retain R&D-related costs during economic downturns. This positive relationship is more pronounced in firms with high levels of green innovation, large-scale enterprises, and non-state-owned firms. These findings suggest that public funding alleviates managerial pressure to cut R&D expenses amid revenue declines, thereby supporting firms’ long-term innovation strategies. Our study contributes to the cost management literature by highlighting a novel channel through which subsidies influence managerial discretion under uncertainty. It also provides policy implications for the future phase-out of subsidies, emphasizing the need for complementary market mechanisms to sustain innovation investment, particularly for small, young, and financially constrained firms.

This study examines how financial constraints affect the sticky behavior of Research and Development (R&D) expenditures, with particular emphasis on the moderating role of green innovation. While maintaining R&D investment during sales declines is critical for sustainable innovation, the convex nature of R&D investment and its dependence on internal funding often cause constrained firms to exhibit reduced stickiness, or anti-stickiness. Using large-sample empirical evidence, we confirm a significant negative relationship between financial constraints and R&D cost stickiness. Crucially, we demonstrate that green innovation strategies mitigate this effect by alleviating financing frictions through enhanced investor confidence, which incentivizes managers to retain idle R&D resources. Robustness tests that extending to Selling, General and Administrative Expenses (SG&A) validate this dual mechanism. These findings highlight green innovation’s strategic value as a resilience lever, advancing environmental goals while strengthening firms’ financial flexibility in the face of resource constraints.